Revenuecracy, tax policy and targets

Pakistan has a tax bureaucracy. What it increasingly needs is a rational tax policy. The distinction matters. A good tax policy decides who should pay, according to ability, and how revenue can finance development without destroying productive capacity. A revenue bureaucracy asks a simpler question: where can money be collected quickly enough to meet the target? Pakistan has gradually converted the second into a system of government for which the late Dr Pervez Tahir coined the term 'Revenuecracy' ['Giving FBR a decent burial', The Express Tribune, November 8, 2019]. Its historical ancestry is uncomfortable. The East India Company could not rule Bengal through military victories alone. After acquiring the Diwani in 1765, it needed records, assessments, collectors and local intermediaries to turn political power into revenue. The conquered economy increasingly financed the machinery governing it. Pakistan is not a colony. The International Monetary Fund (IMF) is not a New East India Company. It possesses no territory, army or revenue jurisdiction. Pakistan negotiates IMF programmes through its government and parliament formally retains constitutional authority over federal taxation. The troubling similarity lies elsewhere. The company required an indigenous administrative machinery to translate revenue demands into collection. Modern external conditionality also operates through Pakistan's own Ministry of Finance, Federal Board of Revenue (FBR), provincial administrations and regulators. The chain today is not Diwani-collector-company treasury. It is external financing requirement-negotiated conditionality – involving the Ministry of Finance, FBR and taxpayer. That difference is enormous. The institutional mechanism nevertheless deserves scrutiny. The IMF's May 2026 review of Pakistan's Extended Fund Facility (EFF) contains a floor for net tax revenues collected by FBR. It separately monitors revenues from retailers and provincial revenue authorities. From December 2026, the FBR revenue floor is scheduled to become a quantitative performance criterion. Tax refunds are also monitored. The structural agenda includes audits, digital invoicing, production monitoring and implementation of FBR's transformation programme. Many objectives are perfectly defensible. Pakistan needs documentation. Agriculture, real estate and other undertaxed sectors cannot indefinitely enjoy privileged treatment. Tax expenditures require scrutiny. Digitalisation can curb evasion. State-owned enterprises cannot endlessly consume public resources. The problem begins when revenue target replaces tax policy. FBR then looks not necessarily for the person who ought to pay, but for the person from whom tax can most conveniently be collected. The salaried employee is visible. The registered company is visible. The importer is stopped at customs. The exporter needs refunds. Electricity and gas consumers can be reached through bills. Banks can deduct taxes. Mobile companies can collect them. Petroleum consumption provides another convenient collection point. The result is a withholding system, advance taxation, minimum taxation and indirect taxation on an extraordinary scale. The politically connected, meanwhile, are much harder to tax. This is revenuecracy: taxing accessibility instead of capacity. The phenomenon is not new. More than two decades ago, an article was published about IMF involvement in erstwhile Central Board of Revenue (CBR) collection targets. Officials were required to prepare lists of major arrears, pursue specified recovery cases and undertake predetermined numbers of audits. Later came the World Bank-funded Tax Administration Reform Project (TARP). Pakistan borrowed money to reform its own revenue authority and employed expensive foreign consultants in the process. Parliament remained peripheral. Billions have subsequently been spent on reform, automation, restructuring, consultants and technology. The essential political economy remains remarkably resistant to change. FBR still chases annual targets. Governments still announce exemptions, concessions and preferential regimes. Existing taxpayers still carry much of the additional burden. Refunds can still become involuntary financing for the state. The collector has changed. The mindset survives. This does not absolve Pakistan by blaming the IMF. Quite the opposite. Pakistan repeatedly approaches the IMF because successive governments have failed to build an equitable fiscal state. External leverage becomes possible because domestic institutions first create the dependency. The IMF also operates through a governance structure in which voting power is unequal. The United States currently possesses 16.49% of total IMF voting power, followed by Japan with 6.14% and China with 6.08%. Pakistan is a sovereign member, but membership does not mean equality of institutional influence. Former Senate chairman Raza Rabbani called the IMF a "new East India Company" in 2019. The description works as political metaphor, not historical equivalence. The company conquered territory. The IMF conditions financing. The more revealing question is why Pakistan needs the financing repeatedly. India approached the IMF during its severe 1991 balance-of-payments crisis. It undertook major reforms and eventually moved away from recurrent programme dependence. Whatever disagreements exist over India's economic model, emergency financing did not become a permanent framework for running its fiscal affairs. Pakistan's experience has been different. Every crisis produces another reform programme. Every programme promises documentation, broadening of the tax base, restructuring and fiscal discipline. Stabilisation arrives. Structural privileges largely survive. The cycle eventually begins again. This makes the argument about sovereignty more complex than slogans about foreign masters. External conditionality can even become convenient for domestic governments. Measures they are unwilling to defend politically can be presented as IMF requirements. The creditor acquires leverage. Government acquires an alibi. Those easiest to tax bear adjustment. Breaking this cycle requires neither anti-IMF rhetoric nor another foreign-funded reform project. It requires making the IMF unnecessary. Taxation must move from extraction to equity. Parliament must determine tax policy rather than merely endorse revenue measures prepared by the executive. Specialists must run specialised institutions. Tax adjudication must be genuinely independent. Refunds must be paid rather than treated as revenue. Privileges must be dismantled before rates are raised on those already documented. The test of sovereignty is not how loudly a state invokes independence. It is whether it can finance legitimate public purposes fairly from an economy strong enough to sustain them. Pakistan nationalised the collector after independence. It must now ask whether it also internationalised the revenue target. THE WRITER IS THE ADVOCATE SUPREME COURT, ADJUNCT FACULTY AT LAHORE UNIVERSITY OF MANAGEMENT SCIENCES, MEMBER ADVISORY BOARD AND VISITING SENIOR FELLOW OF PIDE